Some good news for the tech sector, after Gartner predicts rise in IT spending during 2023, despite economic uncertainty
Analyst house Gartner on Thursday provided some welcome news for the beleaguered tech sector, after predicting a rise in IT spending in 2023.
Gartner forecast that despite the ongoing economic uncertainty, worldwide IT spending is projected to total $4.6 trillion in 2023, an increase of 5.5 percent from 2022.
Indeed, Gartner has predicted a rise in IT spending in all regions, with software expected to see “double-digit (12.3 percent) growth this year as enterprises prioritise spending to capture competitive advantages through increased productivity, automation and other software-driven transformation initiatives.”
IT spending forecast
However Gartner warned of tough times for the likes of Apple and Samsung, after it the cautioned that the devices segment will decline 4.6 percent in 2023, as consumers defer device purchases due to declining purchasing power and a lack of incentive to buy.
“Macroeconomic headwinds are not slowing digital transformation,” said John-David Lovelock, distinguished VP analyst at Gartner. “IT spending will remain strong, even as many countries are projected to have near-flat gross domestic product (GDP) growth and high inflation in 2023.
“Prioritisation will be critical as CIOs look to optimise spend while using digital technology to transform the company’s value proposition, revenue and client interactions,” said Lovelock.
Data centre system spending is forecast to rise 3.7 percent in 2023 – down from 13.7 percent in 2022.
IT services spending is expected to grow by 9.1 percent in 2023, and communication services spending is forecast to grow 3.9 percent this year.
“CIOs face a balancing act that is evident in the dichotomies in IT spending,” added Lovelock. “For example, there is sufficient spending within data centre markets to maintain existing on-premises data centres, but new spending has shifted to cloud options, as reflected in the growth in IT services.”
Gartner said that the IT services segment will continue its growth trajectory through 2024, largely driven by the infrastructure-as-a-service market, which is projected to reach over 30 percent growth this year.
For the first time, price is a key driver of increased spend for cloud services segments, rather than just increased usage.
Gartner also said that despite the huge waves of layoffs and job losses within the tech sector in the past six months, “there is still a critical shortage of skilled IT labour.”
Gartner said the demand for tech talent greatly outstrips the supply, which will continue until at least 2026 based on forecast IT spend.
“Tech layoffs do not mean that the IT talent shortage is over,” said Lovelock. “IT spending on internal services is slowing in all industries, and enterprises are not keep up with wage rate increases.”
“As a result, enterprises will spend more money to retain fewer staff and will turn to IT services firms to fill in the gaps,” said Lovelock.
Meanwhile Perry Krug, director of shared services at cloud database provider Couchbase, welcomed the Gartner increased IT spending prediction, but cautioned that increased budgets are not a silver bullet for success – as cloud overspend is already a problem.
“Gartner’s 5.5 percent forecast is positive, but increased budgets don’t always lead to digital transformation success,” said Krug.
“In fact, our research shows that when it comes to spend on cloud services, enterprises already overspend by $8.75 million on average,” Couchbase’s Krug stated. “Factors driving this overspend include inflexible pricing plans, and management tools not giving the control needed. These are preventing enterprises from using cloud services in the way they want to.”
“To prevent this sort of overspend, and to get cloud usage back on track, enterprises must gain greater visibility over their data, including where it’s stored and how it’s managed,” said Krug. “This needs to apply across the board, with every aspect of increased spending. Without visibility, enterprises can’t run in a more efficient way and ultimately won’t see the full value of their IT investment.”